Fitch keeps H&R Block on negative watch |
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Published
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Fri, 31 Aug 2007 19:28
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NEW YORK (AP) - Credit rating agency Fitch Ratings said Friday it will keep H&R Block Inc. on negative ratings watch after the tax preparer said it was in discussions with Cerberus Capital Management LP to modify the sale of H&R Block's subprime mortgage lending unit.A negative watch means the company could be downgraded in the coming weeks.H&R Block agreed earlier in the year to sell its subprime mortgage lending subsidiary Option One Mortgage Corp. to the private equity firm for $300 million less than Option One's tangible net asset value.Because of the deteriorating mortgage market, Option One is expected to reduce its origination volume to $200 million a month. That figure is below the amount needed to meet one of the closing conditions of the deal, Fitch said.The subprime mortgage market has been in turmoil for months as delinquencies and defaults among the loans given to customers with poor credit have risen rapidly. That has caused the value of the loans to decline, and made investors skittish about purchasing the loans in the secondary market. Subsequently, dozens of subprime lenders have gone out of business or been sold.Any change in the sale scenario that results in impairment on H&R Block's liquidity position or delays its divestiture of Option One into 2008 could result in a ratings downgrade, Fitch said.A ratings downgrade would essentially make it more expensive for H&R Block to borrow money.Shares of H&R Block fell 5 cents to $19.79 in afternoon trading.Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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Twelve structured finance CDOs on negative watch on subprime exposure - Fitch 